Business

Berkshire Hathaway profits soar but Warren Buffett complains about lack of good deals

Warren Buffett on Saturday lamented the lack of attractive investments for his $713 billion Berkshire Hathaway conglomerate, warning that low interest rates over the past two years have boosted valuations across markets. finance.

Thoughts, in Buffett’s long-awaited annual mail, accompanying results showed Berkshire’s operating profit jumped 45% from a year ago to $7.3 billion in the last three months of the year. The gain was driven by strong results from BNSF Rail and the electric utility chain it owns.

Buffett, 91, told Berkshire investors that both he and his longtime right-hand man Charlie Munger find “the little things that get us excited” as they look for investments to make a return. the corporation’s massive $146.7 billion in cash.

“Charlie and I have endured similar cash-heavy positions in the past,” he said. “These periods are never pleasant; They are also never permanent. And, fortunately, we’ve got a mildly appealing alternative in 2020 and 2021 for capital deployment. “

Cash, cash equivalents and short-term Treasury holdings (USD billion) column chart shows Berkshire Hathaway's cash balance remains near record

Buffett, who has been criticized for not using much of the company’s available cash to buy back companies to add to his portfolio, has turned to repurchase Berkshire shares. The company spent $27.1 billion on stock buybacks last year, and Buffett noted in his letter that it purchased an additional $1.2 billion in Berkshire stock in 2022.

The view from the investment industry downturn comes after three months of turmoil in financial markets, with investors dumping shares of loss-making companies as they ran out of risky corners. than the stock market.

“Less politely, I would say that the bull market spawns strong bulls,” said Buffett, before closing.

The moves in the stock market have been driven largely by transferred from the Federal Reserveis poised to raise rates for the first time since 2018 as it works to rein in inflation and curb excesses it sees in the markets.

“Low long-term interest rates drive up the price of all productive investments, whether that be stocks, apartments, farms, oil wells,” Buffett writes. “Other factors also influence valuation, but interest rates will always matter.”

Line chart of Performance since the beginning of 2020 (%) shows After following the broad market for years, Berkshire is back on top

Market conditions are beginning to favor established industrial conglomerates, financial giants, energy and utility giants – all of Berkshire’s lines of business. The company’s shares are up 6.4% so far this year, outpacing the S&P 500’s 8% slide.

Many of the excesses that Buffett and Munger have warned about in recent years has begun to seep out of the market. The average companies in the Russell 3000, which attracts both large and small US businesses, are down more than 30% from their 52-week high, according to Financial Times calculations.

Data from Finra, Wall Street’s watchdog, also signaled that some of the speculation governing trading activity in 2021 has wash. The amount of borrowed money used to finance stock positions has fallen by more than a tenth since October.

“People who are comfortable with their investments get better results than those driven by ever-changing headlines, ramblings, and promises,” says Buffett.

Buffett’s long-term strategy has attracted numerous fans over the years, who have read his annual letter for investment advice and heard him participate in world events.

The company’s annual report, also released on Saturday, shows the company has added several new positions to its $351 billion equity portfolio and is instead a net seller. share. Berkshire spent $8.4 billion in 2021 buying shares. In contrast, it sold $15.8 billion worth of shares.

Column chart of Net Income, by Business (USD billion) showing Berkshire's profits soar along with the US economic recovery

Berkshire’s many operating companies, including ice cream supplier Dairy Queen, insurance company Geico, and private jet operator NetJets, have nonetheless enjoyed a stellar year.

Full-year net income more than doubled from a year earlier to $89.8 billion, or $59,460 per Class A share, an outcome that includes large gains due to an increase in share value. company votes. Buffett has long said that the number of total returns Berkshire must report, influenced by stock market movements, is generally “meaningless.”

Instead, he focused on the operating profits generated by the individual divisions of the company. BNSF reported a 16% increase in earnings to nearly $6 billion, boosted by higher consumer and industrial shipments and coal through its rail. Revenue at the unit, which Buffett described in his letter as Berkshire’s “most significant acquisition,” is almost back to pre-pandemic levels.

A company’s results are often seen as a measure of the broader US economy, with hundreds of subsidiaries it has operations in far-flung industries. Sales at its utilities increased, as did at its manufacturing, retail and home-building businesses.

Buffett also gives gaps in his annual report for Greg Abel, whom the board of directors has appointed as his eventual successor, to detail how Berkshire plans to tackle sustainability at the corporation. This year, the company listed climate change as a risk factor for its business.

Abel said the effort is focused on Berkshire Hathaway Energy, where the company is investing in wind and solar projects, and BNSF.

Source link

news7h

News7h: Update the world's latest breaking news online of the day, breaking news, politics, society today, international mainstream news .Updated news 24/7: Entertainment, Sports...at the World everyday world. Hot news, images, video clips that are updated quickly and reliably

Related Articles

Back to top button